What is the correct multiple?

searcher profile

February 10, 2025

by a searcher in Lawrence, NY, USA

What is the correct multiple for a business in todays lending environment now that SBA loans are at the 10% interest rate mark?
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commentor profile
Reply by an intermediary
from Wesleyan University in Granville, OH, USA
Piling onto what Kyle, Jack, Bill, and Geoff are saying, at the end of the day the buyer needs to model the business with the debt service requirements and make a subjective decision. If I buy this business and achieve these results (therein lies the risk part), will I be happy with the amount of money I get to keep and the experience I gain? When representing sell-side clients it is clear that the same company is worth X to one buyer and Y to another, and they're both right. If the value of the opportunity exceeds your own personal threshold, then you have a good opportunity for you. Some buyers might be satisfied with $100k SDE, others not satisfied with $500k SDE. One will make a deal that the other won't, and it could be a success for them. There's no objective 'list price' in business transactions, it's only a question of whether the finances work for the buyer.
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Reply by a searcher
from Texas A&M University in Austin, TX, USA
Howdy Steven, one way to get an estimate on what multiple is reasonable in a deal is to search for similar recent transactions that have closed and are shared here on Search Funder's BVR tab. You can search by EBITDA size, location, industry, or other similarities to your own deal. You can then see what multiple was paid for those businesses and see if it aligns with what you were thinking for your own deal. Additionally you should model out the cash flows of the business to determine if the current financial performance of the target can sustain the necessary debt payments. Last thing, you want to have some additional margin to play with, or more cash flow to use on other things than just paying for your SBA loan. In this way you can continue to grow the business, have a rainy day fund, and even pay yourself. Hope that helps!
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